April 27, 2009 | Read Time: 1 minute
As the economic recession continues, a growing number of nonprofit and business leaders say that microfinance efforts will thrive during the downturn.
Microfinance, which includes providing small loans to poor people and other financial services, “has proved not only that the poor are credit-worthy, but that banking institutions serving the poor are investment-worthy,” writes Michael Chu, a senior lecturer at Harvard Business School, in an opinion article in Forbes magazine.
Mr. Chu, who is also the former chief executive of Accion International, a nonprofit microfinance organization, says he is also optimistic about microfinance’s potential to fight global poverty because it “is tapping into a technological revolution that enables areas with deficient land-phone service to leapfrog ahead to cellphones and broadband. And, as this takes place, both philanthropy and capital markets are paying careful attention.”
As an example of a successful microcredit project, Mr. Chu pointed to Compartamos Banco, in Mexico, a commercial bank with 1.1 million clients and an average loan size of less than $500.
However, Muhammad Yunus, the founder of the Grameen Bank, which pioneered microcredit in Bangladesh, has said such for-profit institutions concern him.
Last week during the Global Philanthropy Forum in Washington, he said some banks want to provide loans to the poor, but do not have the antipoverty mission that Grameen and other charitable institutions do.
What do you think? Will microfinance grow in American and elsewhere during the recession?
